FHA Farmland

[Vermonter]

The lender is requesting to do as is but omit the addition.

Then it's not as-is. They can't have it both ways

 

[Mark K]

The lender is requesting to do as is but omit the addition.

"Value subject to the Hypothetical Condition that the addition does not exist." If the client does not care about the HC, go for it.

 

[BRCJR]

"Value subject to the Hypothetical Condition that the addition does not exist." If the client does not care about the HC, go for it.

For a federally regulated lender the law requires a value of the property in the "as is' condition. The EA and HC are "additional value opinions" that may be used in a lending decision. Value in use, going concern, etc. are not allowed to be used for real estate lending decision. Those are more business valuations.

From the Federal Register:

The estimate of market value should consider the real property’s actual physical condition, use, and zoning as of the effective date of the appraiser’s opinion of value. For a transaction financing construction or renovation of a building, an institution would generally request an appraiser to provide the property’s current market value in its ‘‘as is’’ condition, and, as applicable, its prospective market value upon completion and/or prospective market value upon stabilization. Prospective market value opinions should be based upon current and reasonably expected market conditions. When an appraisal includes prospective market value opinions, there should be a point of reference to the market conditions and time frame on which the appraiser based the analysis. An institution should understand the real property’s ‘‘as is’’ market value and should consider the prospective market value that corresponds to the credit decision and the phase of the project being funded, if applicable.

 

[Terrel L. Shields]

For a federally regulated lender the law requires a value of the property in the "as is' condition.

Eggzackly why Fannie world and real banks are not the same.

 

[Mark K]

For a federally regulated lender the law requires a value of the property in the "as is' condition.

Yeah, I know. However, if my client tells me to proceed with an appraisal based on a HC, I'll proceed.

Over the years, I've turned in many hundreds of new construction appraisals based on the HC that there is a dwelling on that vacant lot. Why not an appraisal based on the HC that the improvements or parts thereof don't exist?

 

[BRCJR]

Yeah, I know. However, if my client tells me to proceed with an appraisal based on a HC, I'll proceed.

Over the years, I've turned in many hundreds of new construction appraisals based on the HC that there is a dwelling on that vacant lot. Why not an appraisal based on the HC that the improvements or parts thereof don't exist?

In a construction appraisal do you not have the value of the lot ("as is")? How do you do a cost approach without one?
The Appraiser is responsible to know laws, to include the appraisal laws, to include the Interagency Appraisal and Evaluation Guidelines (IAEG). I bet most, the vast majority, Appraisers have never read it.

Even if it is a regulated lender guideline, what is the difference in it and FNMA or Freddie "guideline"?

If an Appraiser is to know GSE guidelines, why should they not be expected to know IAEG?

Lastly, just because a lender has never had a problem with an issue does not mean it is being done correctly. Doesn't an Appraiser have the last say in the SOW, not the lender?

 

[Mark K]

In a construction appraisal do you not have the value of the lot ("as is")? How do you do a cost approach without one?
The Appraiser is responsible to know laws, to include the appraisal laws, to include the Interagency Appraisal and Evaluation Guidelines (IAEG). I bet most, the vast majority, Appraisers have never read it.

Even if it is a regulated lender guideline, what is the difference in it and FNMA or Freddie "guideline"?

If an Appraiser is to know GSE guidelines, why should they not be expected to know IAEG?

Lastly, just because a lender has never had a problem with an issue does not mean it is being done correctly. Doesn't an Appraiser have the last say in the SOW, not the lender?

Of course there's a lot value included, and a CA, but the appraisal is based on the HC that there is a dwelling on the lot, today.

As far as the rest of it, if a client orders an appraisal subject to a HC or EA, that's what I give them. I assume they know what they want. Its worked for 35 years and well over 10,000 appraisals. If you like, I'll provide you the names of the lenders and you can call and discuss it with them.

 

[BRCJR]

Of course there's a lot value included, and a CA, but the appraisal is based on the HC that there is a dwelling on the lot, today.

As far as the rest of it, if a client orders an appraisal subject to a HC or EA, that's what I give them. I assume they know what they want. Its worked for 35 years and well over 10,000 appraisals. If you like, I'll provide you the names of the lenders and you can call and discuss it with them.

No need, as I have access to Federal and State bank examiners. In my role with a regulated lender, I know what they expect. Just because a lender does not know the laws, they are to follow, does not make 10,000 Appraisal Reports completed correctly.

So, with a lot value in the report, have you not complied with the "as is" whether you acknowledged it as such or not?

I have run the same stop sign, daily, for 35 years and never got a ticket, does that make it a Yield sign?

 

[Mark K]

..., does not make 10,000 Appraisal Reports completed correctly.

Only about 1,000 were new, custom construction.

I have run the same stop sign, daily, for 35 years and never got a ticket, does that make it a Yield sign?

Don't know if you're serious about this or not but I have done exactly the same thing for nearly 40 years! Stop sign out in the sticks on the way to my office. I can see for at least 1 mile in each direction; haven't stopped maybe more than once a year for the cross traffic. Maybe we should turn ourselves in.

 

[Terrel L. Shields]

Lastly, just because a lender has never had a problem with an issue does not mean it is being done correctly.

And in the 2008 meltdown, a lot of banks got called out here for not doing it correctly. Some loan officers were just writing a letter appraisal and putting in file. I remember one that came back on the bank was an old coot who needed to borrow money for an operation, but he threatened me and told me not to show up at his place. So, the LO certified a value in a one-page sheet. Well, once the examiners found that, the fit hit the shan and the bank decided to get the old toot a choice. Let an appraiser in or they'd call in the note. He relented and the stupidity of it was that there wasn't much to value in the first place. An old house and 40 acres. I could have done a drive-by in the first place if the LO had let me.

An in-house valuer at another bank also owned bank shares as did her father, a major stockholder. And when examiners discovered that, I and another appraiser were sent to revalue every single property she had valued. And she was banned from doing evaluations. The examiners felt this was a conflict of interest and the board got one of those nasty letters from the examiners.

In 2011, bankers suddenly started using a separate loan ordering system around here. So, a loan secretary of the LO wasn't sending out the requests with the LOs name on it. They created a separate department who did all the ordering for all the LOs. As one said, the reality was 2011 was just a reminder that, in fact, the FDIC had wanted them to do that all along. 14 years later, I basically don't know who the loan officers even are in most banks and the ones I knew are either retired or otherwise gone.